CRA has published the 17 June 2025 STEP Roundtable under its severed letter program. For your convenience, the table below links to the individual items and our summaries prepared in June of last year.

An employer, a restaurant company, which had failed to remit employee source deductions, sold a property and, instead of paying the unremitted source deductions, used the proceeds from the sale to pay an amount owing to an unsecured creditor, namely the TD Bank, with whom it had run up various overdrafts.

In response to a Rule 220 question posed to this effect, Webb J.A. concluded that:

An unsecured creditor can rely on the bona fide purchaser for value defence to defend against a claim by the Crown [under s. 227(4.1)] for the unremitted source deductions of an employer who paid proceeds from the sale of their property to the unsecured creditor.

In this regard, he found that:

• the authorities supported the view that the rules of equity, including the bona fide purchaser defence (including for an unsecured creditor receiving payment of a debt), can apply to a statutory trust such as that under s. 227(4.1).
• the opposite conclusion would imply that, where a tax debtor, rather than paying the proceeds of sale to satisfy the unremitted source deductions, paid such amounts as wages to employees, such amounts would be income to the employees under s. 5(1), without any deduction (by virtue of the prohibition in s. 8) for the requirement under the Crown’s interpretation to repay the wages pursuant to s. 227(4.1).
• the availability of the bona fide purchaser defence to unsecured creditors was not inconsistent with its unavailability under s. 227(4.1) to secured creditors given “that secured creditors are in a better position to manage the risk of being exposed to a claim for unremitted source deductions than unsecured creditors would be”.

Neal Armstrong. Summaries of Toronto-Dominion Bank (TD Canada Trust) v. Canada, 2026 FCA 25 under s. 227(4.1), s. 5(1) and Statutory Interpretation - Presumption of knowledge of legal context.

Regarding a compulsory savings and pension scheme for citizens and permanent residents of a foreign country, to which a Canadian resident had contributed while she was resident in and employed in that country, CRA indicated that the interest of the individual in the fund would not constitute “specified foreign property” if it was described in para. (a) or (b) of the definition of “exempt trust.” It implicitly treated this as being a question as to whether it qualified as a foreign pension plan described in para. (b) of that definition – and indicated that this determination was a question of fact for which there was insufficient information.

Neal Armstrong. Summary of 17 July 2025 External T.I. 2025-1061051E5 under s. 233.2(1) – exempt trust – (b).

Almost two years previously, the Court granted a reverse vesting order (RVO) pursuant to bankruptcy proposal proceedings that provided that certain liabilities and assets would be transferred to a newly established “Residual Co,” and that the shares of the principal debtor corporation (AMI) would be cancelled for no consideration. The trustee, in order to clarify the tax treatment of the distributable proceeds, now sought a declaration that the RVO should be interpreted as providing that such proceeds were received as proceeds of disposition of the AMI shares.

Johnston J. found that she had the jurisdiction to grant such an interpretation, given that no tax return for the applicable taxation year had yet been filed, let alone any tax dispute having arisen, and that this application related to the interpretation of the RVO. However, she declined to grant the requested interpretation, given the paucity of evidence that the parties intended for the RVO to be interpreted in the manner urged by the trustee, that the Court was now being asked, almost two years after the RVO was issued, to provide the requested declaration to achieve the most tax-advantageous treatment and that it was being asked to read in language that was not argued when the RVO was granted.

Similar reasons also prompted her to reject the bolder request, in the alternative, that the RVO be amended (rather than merely interpreted) to add the requested language.

Neal Armstrong. Summary of 2585929 Alberta Ltd (Re), 2026 ABKB 75 under BIA, s. 187(5).